"Why Can't The Government Just Print More Money - " - NOT Such A Silly Question! - Economics in Plain English

11/8/2016
Whycantthegovernmentjustprintmoremoney?NOTsuchasillyquestion!|EconomicsinPlainEnglish
Home
AP/IBEconStudyGuides&LectureNotes
IBEconomicsTextbook
Universe
EconomicsVideoLessons
IBCoursePacing
About
Aug282010
Whycantthegovernmentjustprintmoremoney?NOTsuchasillyquestion!
PublishedbyJasonWelkerat3:20amunderAD/ASModel,Inflation,Interestrates,MonetaryPolicy,MoneyMarket
Like 157peoplelikethis.
Share
Ireceivedthefollowingemailtoday,whichgavemeagreatexcusetowriteablogpostaboutmonetarypolicy!Myreplytotheteacherisbelow.
Jason,
Ihatetobugyou,butIhaveaquestion.IamafirstyearAPEconteacherandIknowsomethingisgoingtocomeuprightawayandIwanttoexplain
itinthesimplestway.Whycantthegovt.justprintmoremoney?Iknowtheinflationpartofit,butwhenIamreadingtolookforqualitywaysof
explainingit,Iseeplentyofinformationaboutit,butIcantgraspit.Principle9inMankiwtextstatesPricesrisewhenthegovt.printstoomuch
money.IfeellikeadumbkidandIamsupposedtoteachthis!!!!
Ifyoucanhelp,great,ifnot,Iwillfigureitout.
Thanks,
Teacher
DearTeacher,
Iloveyourquestion!Itisdefinitelyoneofthoseissuesthatgetsglossedoverinmosteconomicstextbooks.Oritisassumedthatthemoneysupplydiagram
makesitobviouswhyexcessivemonetarygrowthleadstoinflation.ButIagree,thisisoneofthosethingsthatforthefirstcoupleofyearsItaughteconomics,I
probablydidntreallyunderstandallthatwelleither!SoletmetrytobreakitdowninplainEnglishforyou.Thiswillbegoodformetoo,causeIalways
understandthingsmoreclearlymyselfafterwritingthem(whichiswhywritingatextbookisaboutthebestPDIveeveryundertaken!)
So,hereitgoes:
Printingmoneyanditseffectoninflationisabitmorecomplicatedthanitsounds.Infact,itistheUStreasurythatprintsmoney,butitistheFederalReservethat
determineshowmuchmoneyisactuallyincirculationintheeconomy.MoneyprintedbytheTreasuryisdistributedtothetwelveFederalReservebanksaround
thecountry.Thetreasuryandthegovernmentofwhichitisapartdoesnothaveanysayonhowmuchmoneyactuallygetsinjectedintotheeconomy,asmonetary
policydecisionsareleftuptotheFederalReserve.
Traditionally,theFedhasonetoolforinjectingnewmoneyintotheeconomy,atoolknownasopenmarketoperations.(Isaytraditionally,becauseinthelast
threeyearstheFedhasdevisednumerousnewwaystoinjectliquidityintotheeconomy,whichIwillnotgetintonow).Toincreasethenationsmoneysupply,
theFedbuysUSgovernmentbondsontheopenmarketfromcommercialbanks.CommercialbanksinvestsomeofAmericanhouseholdssavingsinto
governmentbondsjustliketheyinvestsomeofourmoneyintoindividualsandbusinessesbymakingloansandcharginginterestonthoseloans.Commercial
bankswillwanttobuygovernmentbondsiftheinterestonthemrisesandwillwanttosellthosebondswhentheinterestratefalls.
IftheFedwanttoincreasethemoneysupplytostimulatespendingintheeconomy,itwillannounceanopenmarketpurchaseofbonds.WhentheFedbuys
bonds,thedemandforbondsincreases,raisingtheirpricesandloweringtheireffectiveinterestrate.Astheinterestongovernmentbondsfallsasaresultofthe
Fedsopenmarketoperations,banksfindthemlessdesirabletoholdontoasinvestmentsandthereforesellthemtotheFedinexchangefor,youguessedit,liquid
money,freshofftheprintingpresses!
Remember,themoneyprintedattheTreasuryandheldattheFedwasNOTpartofthemoneysupply,sinceitisoutofreachofprivateborrowers.Butassoonas
theFedbuysbondswiththatmoney,itisdepositedintocommercialbanksexcessreservesandisthereforenowinthecommercialbankingsystemandtherefore
partofthemoneysupply.So,printingmoneydoesnotimmediatelyincreasethemoneysupplysincenewlyprintedmoneyonlyendsupintheFedonlyonce
theFedhasundertakenanexpansionarymonetarypolicy(anopenmarketbondpurchase)doesthenewlyprintedmoneyenterthemoneysupply.
http://welkerswikinomics.com/blog/2010/08/28/whycantthegovernmentjustprintmoremoneynotsuchasillyquestion/
1/14
11/8/2016
Now,commercialbankshavejustsoldtheirilliquidassets(governmentbonds)totheFedinexchangeforliquidmoney.Picturethemoneymarketdiagramand
youwillseethemoneysupplyincreasing.
Sothenextquestionis,whydoesthisleadtoinflation?
Banksnowholdmoreexcessreserves,mostofwhicharekeptonreserveattheirregionalFederalReservebank.ReservesheldattheFeddoNOTearninterest
forthebanks,andthereforeactuallylosevalueovertimeasinflationerodesthepurchasingpoweroftheseidlereserves.Banks,ofcourse,wanttoinvestthese
reservestoearninterestbeyondtherateofinflationandtherebycreateearnthemrevenue.Inordertoattractnewborrowers,commercialbanks,whosereserves
haveincreasedfollowingtheFedsbondpurchase,mustofferborrowersalowerinterestrate.Theincreaseinthesupplyofmoneyleadstoadecreaseinthe
priceofmoney,i.e.theinterestratesbankschargeborrowers.
Sohereweseewhyanincreaseinthemoneysupplyleadstolowerinterestrates.Withgreaterexcessreserves,banksmustlowertheratetheychargeeachother
(thefederalfundsrate)andthustheprimeratetheychargetheirmostcreditworthyborrowersandallotherinterestratesintheeconomy,inordertoattractnew
borrowersandgettheiridlereservesoutthereearninginterestforthebank.
Lowerinterestratescreateanincentiveforfirmstoinvestinnewcapitalsincenowmoreinvestmentprojectshaveanexpectedrateofreturnequaltoorgreater
thanthenewlowerinterestrate.Additionally,thelowerratesonsavingsdiscouragessavingsbyhouseholdsandtherebyincreasesthelevelofhousehold
consumption.Householdsfinditcheapertoborrowmoneytopurchasedurablegoodslikecarsanditalsobecomescheapertobuynewhomesorundertakecostly
homeimprovements.Sowebegintoseeinvestmentandconsumptionriseacrosstheeconomyastheincreaseinthemoneysupplyreducesborrowingcostsand
decreasestheincentivetosave.Aggregatedemandhasstartedtorise.
Additionally,thelowerrateonUSgovernmentbondsresultingfromtheFedsopenmarketpurchasereducestheincentiveforforeigninvestorstosavetheir
moneyinUSbondsandinUSbanks,whicharenowofferinglowerinterestrates.Fallingforeigndemandforthedollarcausesittodepreciate.Aweakerdollar
makesUSexportsmoreattractivetoforeignconsumers,soinadditiontoincreasedconsumptionandinvestmentintheUS,netexportsbegintoriseaswell,
furtherincreasingaggregatedemand.
Increasingthemoneysupply(notsomuchbyprintingmoneyratherbecauseoftheeasymoneypolicyoftheFed),leadstoincreasedconsumption,investment,
andnetexports,andthereforeaggregatedemandintheeconomy.Therisingdemandamongdomesticconsumers,foreignconsumers,anddomesticproducersfor
thenationsoutputputsupwardpressureonpricesasthenationsproducersfindithardtokeepupwiththerisingdemand.Onceconsumersstarttoseeprices
rising,inflationaryexpectationswillfurtherincreasetheincentivetobuymorenowandsaveless,leadingtoevenmorehouseholdconsumption.Firmsseeprice
risesinthefutureandincreasetheirinvestmentnowtomeettheexpectedrisesindemandtomorrow.
2/14
11/8/2016
Itdoesnottakemuchforinflationtoaccelerateinsuchanenvironment.IfthethegovernmentandtheFeddonotslowdowntheincreaseinthemoneysupply
(STOPTHEPRINTINGPRESSES!)thensoonenoughworkerswillbegindemandinghigherwagesandresourcecostswillstarttoincreaseinallsectorsofthe
economy,causingthenationsaggregatesupplytodeclineasfirmsfindithardertocovertheirrisingcosts.NowwehavebothdemandpullANDcostpush
inflation!Theweakercurrencyalsomakesimportedrawmaterialsmorecostlytofirms,furtheraddingtotheinflationaryenvironment.Aninflationaryspiralis
nowunderway!
MiltonFriedmansaidthatinflationisalwaysandeverywhereamonetaryphenomenon.Controllingtherateofgrowthinthemoneysupply,saythemonetarists,
willassurethatthefluctuationsinthebusinesscyclewillbemildandperiodsofdramaticinflationanddeflationcanbeavoided.Stablemoneygrowthshouldlead
tostableeconomicgrowth.Butassoonaswestartrunningtheprintingpressesinflationwillnotbefarbehind.Ontheflipside,contractionarymonetarypolicies
shouldintheoryleadtotheexactoppositeofwhatIdescribeaboveandcauseadeflation.Ifacentralbankweretotightenthemoneysupplytoomuch,interest
rateswouldrise,investment,consumptionandnetexportswouldfall,andfallingpriceswouldforcefirmstolayoffworkers,leadingtohighunemploymentand
aneconomiccontraction.
Illleaveyouwithonequestiontoponder(theanswertowhichwouldrequireamuchlongerarticlethanthisone!).IfFriedmanwasright,andincreasingthe
moneysupplywillalwaysandeverywhereleadtoinflation,thenhowisitthatthemonetarybaseintheUnitedStatesincreasedby142%between2008and2009,
yetinflationdeclinedoverthesameperiodandfelltoaslowas2%inmid2009?Thatsright,themoneysupplymorethandoubled,yettheeconomywentinto
deflation.WasFriedmanmissingsomethinginhiscalculationthatmonetarygrowthalwaysleadstopricelevelincreases?Inotherwords,isanopenmarket
purchaseofbondsbytheFedallthatisneededtostimulatedemandduringarecession?PerhapsFriedman,whodiedin2006rightbeforetheUSenteredtheGreat
Recession,wouldhavetoreconsiderhisfamousquoteifhecouldseetheeffect(orlackofeffect)ofAmericasunprecedentedmonetarygrowthoverthelast
threeyears!
Abouttheauthor:JasonWelkerteachesInternationalBaccalaureateandAdvancedPlacementEconomicsatZurichInternationalSchoolinSwitzerland.
Inadditiontopublishingvariousonlineresourcesforeconomicsstudentsandteachers,JasondevelopedtheonlineversionoftheEconomicscoursefor
theIBandishasauthoredtwoEconomicstextbooks:PearsonBaccalaureatesEconomicsfortheIBDiplomaandREAsAPMacroeconomicsCrash
Course.JasonisanativeofthePacificNorthwestoftheUnitedStates,andisapassionateadventurer,whoconsidershimselfaskier/mountainbikerwhoteaches
Economicsinhisfreetime.HeandhiswifekeepaskichaletinthemountainsofNorthernIdaho,whichnowthattheyliveintheSwissAlpsgetsfartoolittleuse.
Readmorepostsbythisauthor
Like 157peoplelikethis.
Relatedposts:
1.FromtheHelpDeskmoreonloanablefundsandthemoneymarket
2.LoanableFundsvs.MoneyMarket:whatsthedifference?
3.WilltheFedseasymoneypolicyfuelglobalinflation?
4.FromtheHelpDesk:themoneymultiplierandnewmoneycreation
5.Acommonerrorconfusingthemoneymarketandmarketforforeignexchange
54responsessofar
54ResponsestoWhycantthegovernmentjustprintmoremoney?NOTsuchasillyquestion!
1.#Antonette,Kate,Joeon11Dec2010at12:29am
Jason,
WearefourstudentsinAPEconomics.Atfirst,thesamequestioncrossedourmindsastowhythegovernmentcan'tjustprintmoneyandputitinthe
economyalso.ThenwelearnedthattheFedcontrolsthemoneysupplyandmakesthedecisionsabouthowtochangeit.Wefurtherstudiedhow
establishingexpansionarymonetarypolicyleadstoashiftrightintheADcurveontheaggregatesupplyanddemandgraphandleadstoinflation,andhow
theloanablefundsmarketandconsumerexpectationscancauseinflationaswell.Soaswereadyourquestionabouthowtherewasmonetarygrowth
betweentheyearsof2008and2009,wewonderedwhyyouthinkthattherewasdeflationdespitethefactthattheFedincreasedthemoneysupply.Doyou
thinkthattheopenpurchaseofbondsbythegovernmentdidn'taffectconsumerdemandinthisinstance?Ifso,why?
Thanks,
3/14
11/8/2016
StudentsAntonette,Kate,Joe,andSarah
2.#JohnEon21Dec2010at3:18pm
Thisisinresponsetothearticle,"Whycantthegovernmentjustprintmoremoney?
ABETTERQUESTIONISWHYDOESOURGOVERNMENTHAVETOPRINTMOREMONEY?
http://welkerswikinomics.com/blog/2010/08/28/why
Mr.Friedmandidnotexpandonafewitemsinhiscalculation.IbelievehethoughtweAmericansweresmartenoughtoknowthemalready.Iguesshewas
wrong.
1.Thebankshavetobewillingorforcedtolendthemoney.Inthisatmospherethebankshavealreadybeencastratedforfoolishlylendingmoneyto
millionswhotheyknewcouldnotmakethepaymentsontheloans.Whyweretheydoingthis?Weretheyforcedtobysomeone?
2.ThePeoplewhoareabletopaybackloanshavetobewillingtoborrowthemoney.TheGovernmenthasbusinessesandcapableborrowersscaredto
deathwiththeirbuttonpushingtactics.Forexamplethelatestbuttonpushingisamethodtodiscontinuetheabilitytowriteofftheinterestonhomeloans.
Peoplewhointendedtopayofftheloansbuilthousesbasedonthecurrenttaxationrules.Afterinvestingthemoney,thebuttonpushersnowaredecidingto
pullthecarpetoutfromunderthefeetofmillions.Thetaxcodepeoplearenowturningoffthebuttonchangingtherulesontaxrulesformarriedfiling
jointly.Thecreditforeachchildinthehouseholdisbeingreduced.Howaboutthenew3%taxthatisnowpayabletothegovernmentforthosethatsell
theirhouse.ThisisinthenewhealthcareLAWinordertopayfortheaffordable"Freehealthcare".
Letsseewhatthis(Freehealthcare)redbuttonwilldoifwepushit.
Hmmmmlookattheprettyblue(taxincrease)buttonyahtrythatone.
Orshouldweidletheknobthatpreviouslyenticedthebankstoactuallyloanmoney.Wowthatonehadgreatnegativeeffectsonthepublicaswellas
privatesector.SeemsthebanksbecamemorewillingtoloanmoneytotheFedat1%inordertostayinbusinessinsteadofthepublicat6%.
Theorangetogglebutton(CashforClunkers)raisedthecarsalesshorttermandthenwastoggledbackoff.
Orthegreenethanolbuttonthatactuallychangedthecorn/beanmarket.Yespeopleusedthecornandbeanstofeedanimalsandpeople.Whenthecornis
usedforethanolthepriceforthecorn(feed)wentupandsodidthecosttoraisetheanimalsitwasintendedfor.Ontopofthistheethanoldoesn'teven
provideaneconomicfuel.Onegallonofdieselfuelwillpushavehiclewayfurtherdowntheroadthanagallonofethanol.Lookitup!
Nowletslookatthesolarfiasco.Thecostofthesolarcellsandthewindmillstopurchaseandinstalltakesapproximately30yearstorecoup.Theseare
reallycoolideasbuttheyarenotsavingmoneyandarenotsustainable.Wanttogogreen?Buyagreenautomobilethatrunsongasoline.Andohbythe
wayItisnotasintodrillourownoil.EverycountryintheworldthathasoildrillsforitandsellsittotheUSA.Wehaveourownoil.DRILLIT!!
Wehaveourownfertilesoil.GROWCROPSONITandgetridofthesubsistencethatpayspeoplenottogrowcrops.Itisawellkeptsecretbut..
shhhhhhWECANSELLTHECROPSTOTHEBILLIONSOFPEOPLEINTHEOTHERCOUNTRIESONTHISBIGBLUEPLANET.
Anotherwellkeptsecret.Wealsohaveproductswecanactuallymakeinthiscountry.BetweentaxationandtheEPAregulationsandOSHAsafety
regulationsintheUSA,ourbusinessesarebeingstrangled.
ThisIsWhyThereAreNoJobsinAmerica
ByPorterStansberry
I'dliketomakeyouabusinessoffer.
Seriously.Thisisarealoffer.Infact,youreallycan'tturnmedown,asyou'llcometounderstandinamoment
Here'sthedeal.You'regoingtostartabusinessorexpandtheoneyou'vegotnow.Itdoesn'treallymatterwhatyoudoorwhatyou'regoingtodo.I'll
partnerwithyounomatterwhatbusinessyou'reinaslongasit'slegal.
ButIcan'tgiveyouanycapitalyouhavetocomeupwiththatonyourown.Iwon'tgiveyouanylaborthat'sdefinitelyuptoyou.WhatIwilldo,
however,isdemandyoufollowallsortsofrulesaboutwhatproductsandservicesyoucanoffer,howmuch(andhowoften)youpayyouremployees,and
whereandwhenyou'reallowedtooperateyourbusiness.That'smyroleintheaffair:totellyouwhattodo.
Nowinreturnformyrules,I'mgoingtotakeroughlyhalfofwhateveryoumakeinthebusinesseachyear.Halfseemsfair,doesn'tit?Ithinkso.Ofcourse,
that'shalfofyourprofits.
You'realsogoingtohavetopaymeabout12%ofwhateveryoudecidetopayyouremployeesbecauseyou'vegottocovermyexpensesforpromulgating
alloftherulesaboutwhomyoucanemploy,when,where,andhow.Comeon,you'remypartner.It'sonly"fair."
Nowafteryou'veputyourhardearnedsavingsatrisktostartthisbusiness,andafteryou'veworkedhardatitforafewdecades(payingmemy50%ora
bitmorealongthewayeachyear),youmightdecideyou'dliketocashouttofinallylivethegoodlife.
Whetherornotthisis"fair"somepeoplenevercanaffordtoretireisadifferentargument.Asyourpartner,I'mhappyforyoutosellwheneveryou'd
likebecauseouragreementsays,ifyousell,youhavetopaymeanadditional20%ofwhateverthecapitalizedvalueofthebusinessisatthattime.
IknowIknowyouputupalltheoriginalcapital.Youtookalltherisks.Youputinallofthelabor.That'salltrue.ButI'vedonemypart,too.I've
collected50%oftheprofitseachyear.AndI'vealwayscomeupwithmorerulesforyoutofolloweachyear.Therefore,Ideserveanother,final20%slice
ofthebusiness.
Ohandonemorething
4/14
11/8/2016
Evenafteryou'vesoldthebusinessandpaidallofmyfeesI'drecommendbuyinglotsoflifeinsurance.Yousee,evenafteryou'vebeenretiredforyears,
whenyoudie,you'llhavetopayme50%ofwhateveryourestateisworth.
Afterall,I'vegotlotsofpartnersandnotallofthemareassuccessfulasyouandyourfamily.Wedon'tthinkit's"fair"foryourkidstohavesuchabig
advantage.Butifyoubuyenoughlifeinsurance,youcanfinancethisexpenseforyourchildren.
Allinall,ifyou'reaverysuccessfulentrepreneurifyou'reoneoftherare,lucky,andhardworkingpeoplewhocancreateanewcompany,employlotsof
people,andsatisfythepublicyou'llenduppayingmemorethan75%ofyourincomeoveryourlife.Thankssomuch.
I'msureyou'llthinkmyofferisreasonableandhappilypartnerwithmebutitdoesn'treallymatterhowyoufeelaboutitbecauseifyouevertrytostiff
meorcheatmeonanyofmyfeesorrulesI'llbreakdownyourdoorinthemiddleofthenight,threatenyouandyourfamilywithheavy,
Automaticweapons,andthrowyouinjail.
That'showcivilsocietyissupposedtowork,right?ThisisAmerica,isn'tit?
That'stheofferAmericagivesitsentrepreneurs.AndtheidiotsinWashingtonwonderwhytherearenonewjobs
Itistimetountanglethismessandgetbacktotrueresponsibleanduninterruptedbusiness.QuitthepettyBullshitofpushingrandombuttonsandgetback
towork.
Leadresponsiblyorgetoutoftheway.
signed:Mytwocents.
3.#Chrison18Apr2012at1:45am
Iamspeechlessbutthismyfriendissotrue!Thankyouputtingthisalltogetherforme.
4.#lesleyon16May2012at6:34pm
yesiunderstandbutstilltheyshouldprintmoremoneyanywayandusethismoneyforpovetyandformedicalandtodoawaywithstarvationinthewhole
world.justpayoffalldefecitandstartfreshlikejustadmititthetheworldneedsthisbreaknowforgetpoliticsforaonetimepayalldebtandfeedthe
worldandyesitsthatbloodysimple.
5.#SelloMalatsion14Mar2011at5:02pm
I'mBtechstudentinEconomics,butI'mstillfrustatatedafterreadingwhatJasenwelkertriedtoexplain
6.#narayanon23Jun2011at12:43pm
whichbasesongovtprintcurrencynotes
7.#GMEllison24Jul2011at9:33pm
PleaseexplainwhatissupposedtohappenAugust2,2010.Ifthegovernmentcan'tissuemoredebt(debtceilingremainsunchanged),andpaymentsmust
bemadeontheexistingdebt,won'ttheysimplymakethosepaymentswithFederalReserveNotes?Expandingthemoneysupplymaycauseinflation(nota
terribleresultinthecurrenteconomy?),butthatwouldbeamuchbetterchoicethendefaultingonbondpayments.
8.#Apersonon02Aug2011at7:26pm
Yeah,Istilldon'tgetit.Isthereawaytoexplainitinsmallstepsusingeasytounderstandexamples?AllthattalkabouttheFedbeingincontrolofthe
moneyandbanksandloansthrewmeoff.IamevenmoreconfusedthanIwasbefore.
9.#SunilUpadhyayon20Sep2011at2:45pm
Stillnotclear..
HowgovernmentdecideHowmuchcurrencyneedstobeprinted?
Thereissomebasisofthattodecidethat,thismuchofamountneedstobeprintedonthebasisofholdinggoldandbullions.
Hopeyoucanhelpmetoresolvethisquery
10.#JasonWelkeron20Sep2011at3:55pm
Theamountofmoneyinaneconomyhasnoimpactonthateconomy'sabilitytoproducegoodsandservices.Moneyisamediumofexchange,justlike
seashellsorstonecircleshavebeeninothercultures.Increasingthemoneysupplymayincreasepeople'sdesiretospendmoney,butitdoesnotnecessarily
increasetheeconomy'scapacitytoproducegoodsandservices.Morespendingwithoutmoreproductionleadsonlytoinflation.
Anation'scentralbankisabletocontroltheamountofmoneyincirculationatanygiventime,butitcannotincreaseordecreasetheproductivecapacityof
theeconomy.Therefore,acentralbankcannotcontributetolongruneconomicgrowthinanation.Whatitcancontrol,essentially,istheamountofmoney
incirculation,andthusthevalueofmoney.Iftoomuchmoneycirculates,thevalueofmoneyfalls(meaningeverythingismoreexpensive),iftoolittle
moneyisincirculation,itsvalueincreases(meaningpriceswillfall).Therefore,mostcentralbankstodayviewtheirprimaryroleasmaintainingpricelevel
stability,sincetheyrecognizethattheamountofmoneyhasnorealbearingontheproductionpossibilitiesofanation'seconomy.
11.#GMEllison20Sep2011at6:39pm
Iunderstandthatprintingmoneydoesn'tincreaseproductivity.ThevalueofallproductivityinthenationisXandtheaggregatepriceforthatproductivityis
thatnumberdividedintothetotalmoneysupply.Increasethemoneysupplyandpricesgoup.
5/14
11/8/2016
Butthereisalmostnoinflationrightnow(despitetheincreasingmoneysupplyoverthelasttwoyears),sowhatistheharmofcontinuingtoincreasethe
moneysupply?Atwhatpointdoesittipthescaleandturnintorunawayinflation?Someinflationisgooditincreasesprices,increasestaxrevenuesand
helpsstimulatetheeconomy.Thestimulusmoneyallofwhichwaseitherborrowedthroughbondsorprintedwassupposedto"primethepump"buthas
hadnegligibleimpact.Isn'tpayingdownthedebtbyexpandingthemoneysupplyaviableoption?Ifnot,whynot?
12.#SQT....StupidquestionthreadPage16on19Nov2011at12:13pm
[]isnotastupidquestionbtwShitrus.ThisexplainsitindetailbutsimplifiedWhycantthegovernmentjustprintmoremoney?NOTsuchasilly
questioReplyWithQuote+Replyto[]
13.#Timothyon05Dec2011at9:36pm
Perhapsamostbasicandgrosslysimplifiedexamplemighthelpalittle,atleastithelpsmethinkaboutitatabasiclevel.Whatwouldhappenifthe
governmentprintedmassiveamountsofextramoneyandgave$1milliontoeachpersonintheU.S).Whatwouldhappennext?Howmanywouldgoto
workthenextday?Noone.Atleastnotanywhosupplybasiceverydayneeds.Whowouldneedtoearnafewdollarswithamilliondollarsinhand?
Everyoneconsidersthemselves"wealthy"andcanaffordtobe"theidlerich."Untileveryonegets"hungry."
Howmuchmoneywouldhavetoofferedtoconvincepeopletogobacktoworkandproducethethingstheyusedtoproduce?Everythingwouldescalatein
pricepropotionaltotheamountofunsubstantiatedgaintheeconomyreceived.Workerswouldnotworkuntilthecostofprintingmoneyworksthroughthe
economyanda$200grocerybillturnsintoa$20,000grocerybillanda$20,000carturnsintoa$2,000,000.Thebottomlineisthatwecanreasonably
concludethattheendofthisexperimentpeoplewillbenobetteroffaftertheyreceivedthemilliondollarsthenbefore(althoughitmightactuallymakethe
situationworsethenbefore).
14.#welkerjasonon05Dec2011at11:32pm
Timothy,that'sanexcellentexplanation!Thanks!
15.#IntroductiontotheMoneyMarket|TheEconomicsClassroomon17Jan2012at4:48pm
[]Whycantthegovernmentjustprintmoremoney?NOTsuchasillyquestion![]
16.#TheToolsofMonetaryPolicy|TheEconomicsClassroomon19Jan2012at12:19pm
[]Whycantthegovernmentjustprintmoremoney?NOTsuchasillyquestion![]
17.#leonardon14Feb2012at11:30pm
everyonesdebtsshouldbecleared,moremoneyprinted.noloansorcreditcards,orstorecardsormortages.startfromfresh.soendwhatyouhaveand
whatyouearn.affordablepricesforhouses,sopeoplecansavewhilerentingandthenbuyahouseinonegowhentheysavedenoughmoney.
lifedoesn'thavetobethatcomplicated.there'senoughmoneyandfoodintheworldforeveryone.nooneshouldhavetogohungryorwithout.ihatethis
worldwelivein.wearenotinpeacenomatterwhatwethink.
well???
20.#kayon21Feb2012at3:30pm
johnE,best.read.ever.
21.#shahidon11Apr2012at7:36pm
Ithinkthemoneysupplyintheeconomyshouldnotbecontrolbyany,theactualproductionandactualconsumptionshouldbethemeasureofthepriceof
anygoods.ifthegovtjustgoonprintingmoremoneyandinjectitintheeconomy,onlythedebtwillincreaseandtherealmeasureofpricewillnotbeknow
itisthepolicycontrolpriceofcommodity.letthenaturedecidehowandwhatshouldbethepriceofacoomodity.
22.#Sidon14Apr2012at5:24pm
Peopleandbusinessesarestilldeleveraging.Ratesarelowbecausethedemandforborrowedfundsisweak.Ifpeopleandbusinessesdontborrow,theydont
spend.Iftheydontspend,thenwehavedeflation.SoFriedman'stheorywasincomplete.Anincreaseinthemoneysupplyisonlythefirstcomponentof
inflation.Thesecondisawillingnesstoborrowandspend.
23.#Sidon14Apr2012at5:32pm
Asaside.
WoulditmakeadifferenceiftheUSdebtwas$100TifalmostallofitwasowedtotheFed?Inotherwords,whataretherepercussionsoftheFedamassing
thismuchinTreasuriesifthe"interest"theyearnisjustgivenbacktotheTreasury?Certainlythere'sapointwherethepublicgetsscared.Butsowhat,as
longastheFedkeepsbuyingTreasurieswithmoneytheycreate,torunthegoverment.
24.#Bradon24May2012at6:29pm
Seemslikealotofwelldeservedantigovernmentmonetarypolicyhatehere,Ilikeit.
Butmoretotheactualquestionthatwasaskedandforthosewhomightstillbelookingforamorethanprobableanswer,trythis:
Theincreaseinmoneysupplydoeshaveaprofoundeffectonspendingandaggregatedemandasawholeleadingtoinflationprovided.andthisisabig,
oftenoverlookedcondition,providedthepeopleinthesocietyarewillingandexuberantenoughtoactualspendthemoneythatisavailabletothem.
6/14
11/8/2016
Whatweareseeingknowacrosstheboardinmanydevelopedcountriesarepeoplebeingsomewhatoverlycautiousabouteconomicstability,withnofault
ontheirpart,asbirationalbeings(humans)itmakessensethatafteraseriousrecessionthatpeoplefelttheconsequencesof,theywouldthinktwiceabout
looseningthepursestringsforanothergoonthe"rollercoaster".
SowhatweareseeinginmyopinionisthegovernmentpumpingmoneythroughtheFedintothecountrybutfailingtoinspireconsumerconfidenceand
spurspendingandborrowingandinvestmentandentrepreneurialspiritthatcanthenleadtomorespendingwhethergoodorbad.
Ithinkyougetthegist.
Manywouldlikelydisagreewithme,butIsubscribefullytothehypothesisthathumanbeingsareemotionalinmanyways,andindecisionmakingmoreso
thanothers.
25.#VenkataSunilon03Sep2012at5:38am
HiBrad,
IamfromIndia.Iunderstandtheinflationconcept.Butmyquestionis.Whycan'tacountrylikeIndiawhichhashugeforeigndebt,printrupee(Indian
currency)andpayoffitsdebt.Iftheprintedmoneyiscirculatingwithinthecountrythenitcanleadtoinflation.Butiftheprintedcurrencyispumpedoutof
thecountrybywayofpayingforeigndebtthenwheredoesthepointofinflationcome?Aslongasthepumpedoutcurrencydoesn'tcomebacktoIndia,we
aresafefrominflation.Isn'tit?CorrectmeifIamwrong.
26.#WhoOwnstheMoney?Economicsfor4thGradersUPDATED:PragmaticMomon15Jul2012at11:03pm
[][]
27.#Curiouson04Sep2012at5:21am
I'mnotaneconomistorevenaneconomystudentbyanymeans,justalaypersontryingtounderstandthis.Thisarticleexplainsalotofthingsverywell,
butthebasicthingthatIwanttoknowisthis:
WhydoesallmoneythatiscreatedhavetobedistributedthroughtheFedandbigbanks,byloaningitoutwithinterest?Doesn'tthismethodcreatea
situationinwhichdebtwillalwaysoutweighmoneysupply?Ifmoneyissupposedtosimplybeawayoffacilitatingtrade,wouldn'titbebettertosimply
createmoremoneyanddistributeitinsomewaythatdidnotinvolveusury,tomatchthegrowingGDP/economicactivity,andfacilitatetheamountoftrade
takingplace?Whyistheelementofdebt,interest,andusuryanecessarypartofthisequation?
Again,I'matotalnoobtoeconomics,butthesituationseemstomelikeascam,asifacreditcardcompanysomehowlobbiedcongresstoensurethatthey
weretheonlysourceofmoney,andsoeverytimemoneyiscreated,thepeoplecollectivelyowethemmorethanitispossibletorepay,duetothedebt
alwaysoutweighingthemoneysupply.PerhapsthereissomethingI'mnotseeinghere,pleasehelpmetounderstand.
28.#TruthorConsequenceson20Aug2014at4:21pm
YouarecorrectCurious,it'sthedevaluingofthecurrencythatcausespriceincreaseandthatisdonebynotprintingtheinterestonthedebtandisescalated
bythefedseasymoneypolicy.Therefore,eventuallyallthe"money"incirculationwillbetopaytheinterestonthedebtthat'snotgood!Seemstomewe
aregettingclosetoinsolvency.
Interestingly,theUSTreasuryprintsthemoneyandloansittothefedandtheyloanitbackwithinterestthesameaccountingasdoneonamortgage(dead
pledg>literalFrenchmeaning).Whenthepromisorynoteissigneditisimmediatelydepositedintoanaccount(asifyouloanedthebankthemoneyfor
yourownloan)andthenloanedbacktous(thelender)withamortizinginterest.Veryprofitablescam!Ithoughtsomethinghadtoinitiallybeinyour
possessionbeforeitcouldbeloanednotaccordingtothefed!GoodolefractionalreservebankingiftheTreasurywouldjustprintthemoneyandcutthe
fedoutoftheequationamultitudeofevilswoulddisappear.That'swhatmiddlemendo,gettheircutoftheactionandjackupthepriceforgoods.
29.#<interesting>HowMONEY&BANKINGReallyworksPage15www.hardwarezone.com.sgon04Feb2013at7:03am
[]orwell76wrote:iftheUSgovernmentisseriousaboutendingthisbankers'tyranny,theycanstopborrowingfromFederalReserve,lettheUStreasury
printthemoneyinsteadbutbeverysureanyUSPresidentwhothatdoesthiswillbeassassinatedRepublicancandidateRonPaulopenlyspeaksofthe
bankertyrannynochancehewillevergetelectedthinkthetreasuryprintsthemoneybuthowthemoneygoesintothesystemisdictatedbythefederal
reserve.Whycantthegovernmentjustprintmoremoney?NOTsuchasillyquestio[]
30.#Robyon23Apr2014at4:50pm
Friedmanwaswrongbecausedidn'tknowtheMMT!
31.#ItsallabouttheMoney,honey|tuseetjhaon29Jun2014at6:36am
[]WhichboughtmetothebiggerquestionWhycanttheFederalReserveBankjustprintmoney?[]
32.#nileshon29Jul2014at12:54pm
readthisarticlewrittenonthesametopic..
Maybethiswillmakeyourarticlemoreexplanatory..Sowillnotmondifyouwanttoaddthelinktoyourarticleaswell:
http://nxtinsight.com/whycantjustprintmoremo
33.#googleapikeyon27Aug2014at3:25pm
googleapikey
?Whycan?tthegovernmentjustprintmoremoney??NOTsuchasillyquestion!|EconomicsinPlainEnglish
34.#esllessonplanson23Dec2014at7:09pm
7/14
11/8/2016
esllessonplans
35.#Eslactivitiesforkidson26Dec2014at3:33am
Eslactivitiesforkids
36.#m88on18Jan2015at11:52am
m88
37.#BrightStartAcademyOFallonMOon03Mar2015at7:44pm
BrightStartAcademyOFallonMO
38.#FCATtutoringinMiamion18Mar2015at7:10pm
FCATtutoringinMiami
39.#MeremasPayudaraWanitaon27Mar2015at6:12pm
MeremasPayudaraWanita
40.#WebDesignBellevueon17Jun2015at7:48am
WebDesignBellevue
blogtopic
41.#mscisingaporerealestateindexon01Jul2015at1:09am
mscisingaporerealestateindex
42.#LearnSpanishinPuertoRicoon10Jul2015at3:25am
LearnSpanishinPuertoRico
43.#customstampsusps,approvedstamppsd,stampinuppaperpumpkin,amazonstampsusps,rubberstampgiftbags,trodatprinty4912typo,stampact
protests,ebaystampcollectionsforsale,trodatstamppadmsds,approvedfireprotectiongreensburgpa,stampmakingkon19Aug2015at5:12pm
customstampsusps,approvedstamppsd,stampinuppaperpumpkin,amazonstampsusps,rubberstampgiftbags,trodatprinty4912typo,stamp
actprotests,ebaystampcollectionsforsale,trodatstamppadmsds,approvedfireprotectiongreensburgpa,stampmak
44.#canon7don27Aug2015at6:26am
canon7d
45.#allnaturalelectrolytesupplementareelectrolytesupplementssafebestelectrolytepillsbestelectrolytereplacementdrinkbestelectrolytereplacement
drink5kbestelectrolytereplacementdrinkdiarrheabestelectrolytereplacementdrinkforcyclingon20Sep2015at5:32am
allnaturalelectrolytesupplementareelectrolytesupplementssafebestelectrolytepillsbestelectrolytereplacementdrinkbestelectrolyte
replacementdrink5kbestelectrolytereplacementdrinkdiarrheabestelectrolytereplacementdrinkforcyc
46.#BudgetFurnitureshopssydneyon24May2016at2:24am
BudgetFurnitureshopssydney
47.#electronicsforlessukon25May2016at6:15am
8/14
11/8/2016
electronicsforlessuk
48.#electricalwireconnectorscolorcodeon26May2016at11:04am
electricalwireconnectorscolorcode
49.#vipparisescorton14Jun2016at1:28am
vipparisescort
50.#cheapOnlineshoppingUkclotheson05Jul2016at6:01pm
cheapOnlineshoppingUkclothes
51.#11ReasonsToMakeSillyAmountsOfMoneynobchet.infoon27Aug2016at3:26am
[]Whycantthegovernmentjustprint"Whycantthegovernmentjustprintmoremoney?Theamountofmoneyinaneconomyhasno
impactNOTsuchasillyquestion!|EconomicsinPlainEnglish[]
52.#johnlewiscarinsurancepromocodeon11Sep2016at7:22am
johnlewiscarinsurancepromocode
53.#electricalrelayswitchwikion15Sep2016at9:12am
electricalrelayswitchwiki
54.#m88taruhansporton07Oct2016at7:44am
m88taruhansport
TrackbackURI|CommentsRSS
LeaveaReply
Youmustbeloggedintopostacomment.
Subscribeviaemail
EnteryourEmail
Subscribeme!
Preview|PoweredbyFeedBlitz
OrderWelkersbooks
forIBEconomics
forAPMacro
TheEconomicsClassroomVideoLectures
TheTotalRevenueTestofPriceElasticityofDemand
UsingLinearDemandEquationstoDetermineQuantityandCalculatingthePintercept
IntroductiontoDeadWeightLoss(WelfareLoss)
Browseallcategories
Browseallcategories SelectCategory
9/14
11/8/2016
IntroductiontoEconomics
Scarcity
BasicEconomicQuestion
Opportunitycost
Tradeoffs
Productionpossibilitiescurve
PriceTheory
CircularFlowModel
FactorsofProduction
Cost/BenefitAnalysis
Incentives
Utility
Utilitymaximization
Comparativeadvantage
Specialization
Economicsystems
FreeMarkets
Commandeconomies
Rationalbehavior
Markets,DemandandSupply
Elasticity
Supply/Demand
LaborMarket
Wages
Oilprices
PriceTheory
Pricecontrols
DeterminantsofDemand
LawofSupply
Substitutes
DeterminantsofSupply
Cost/BenefitAnalysis
Specialization
Normalgoods
Lawofdiminishingreturns
Inferiorgoods
Utility
Equilibrium
CircularFlowModel
Consumersurplus
GiffenGoods
LinearDemandandSupplyEquations
Producersurplus
Elasticity
GovernmentIntervention
MarketFailure
Marketfailure
Externalities
Taxes
CoaseTheorem
Environment
Publicgoods
TheTheoryoftheFirm
Costsofproduction
Costminimization
Profitmaximization
Lawofdiminishingreturns
Efficiency
Marketstructure
Perfectcompetition
Monopolisticcompetition
Oligopoly
Monopoly
collusion
10/14
11/8/2016
GameTheory
pricegouging
Barrierstoentry
Economiesofscale
Nonpricecompetition
Pricediscrimination
ResourceMarkets
LaborMarket
FactorsofProduction
Wages
Livingwages
Income
TheOverallLevelofEconomicActivity
CircularFlowModel
BusinessCycle
GDP
AggregateDemandandAggregateSupply
AD/ASModel
Consumption
Investment
Exports
Savings
MacroeconomicObjectives
EconomicGrowth
Unemployment
Inflation
Deflation
PhillipsCurve
Incomedistribution
Taxes
LafferCurve
MacroeconomicPolicies
FiscalPolicy
KeynesianEconomics
Government
Multipliereffect
MPC
MPS
Expectations
Budgetdeficit
Nationaldebt
CrowdingoutEffect
LoanableFundsMarket
MonetaryPolicy
MoneyMarket
Banks
Interestrates
Recession
Supplysideeconomics
Financialmarkets
Creditcrunch
Inflation
FreeTradeandProtectionism
Trade
Internationaltrade
FreeTrade
Comparativeadvantage
Specialization
Exports
Protection
Barrierstotrade
11/14
11/8/2016
Tariffs
Dumping
ExchangeRates
BalanceofPayments
EconomicIntegration
EconomicDevelopment
Development
Health
HumanDevelopmentIndex
Poverty
StandardofLiving
Sustainability
Aid
Fairtrade
Microfinance
Education
IMF
Licensedmaterial
Welker'sWikinomicsBlogbyJasonG.WelkerislicensedunderaCreativeCommonsLicense
SearchWelkersWikinomics
Search
MeettheAuthor
JasonWelker@ZIS
APandIBEconomicsCourseInformation
PracticeAPMicroquestions
PracticeAPMacroquestions
APMicroCourseHomepageCollegeBoard
APMacroCourseHomepageCollegeBoard
TheExtendedEssayinEconomics:advicefromanIBteacher
WelkersPages
About
Universe
AP/IBEconStudyGuides&LectureNotes
IBEconomicsTextbook
IBCoursePacing
EconomicsVideoLessons
Loginorregister
Login
EntriesRSS
CommentsRSS
WordPress.org
WhosReading?
12/14
11/8/2016
BlogArchives
September2015
August2015
February2015
November2014
August2014
December2013
April2013
March2013
February2013
January2013
November2012
October2012
September2012
August2012
July2012
May2012
April2012
March2012
February2012
January2012
December2011
November2011
October2011
September2011
August2011
July2011
June2011
May2011
April2011
March2011
February2011
January2011
December2010
November2010
October2010
September2010
August2010
May2010
April2010
March2010
February2010
January2010
December2009
November2009
October2009
September2009
August2009
June2009
May2009
April2009
March2009
February2009
January2009
December2008
November2008
October2008
September2008
August2008
July2008
June2008
May2008
April2008
March2008
February2008
January2008
13/14
11/8/2016
December2007
November2007
October2007
September2007
August2007
July2007
June2007
May2007
April2007
October200
FreeWordPressTheme|WebHostingGeeksEconomicsinPlainEnglishCopyright2016AllRightsReserved.
PodcastpoweredbypodPressv8.8.10.17
14/14

"Why Can't The Government Just Print More Money - " - NOT Such A Silly Question! - Economics in Plain English

Transféré par

Informations du document

Titre original

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

"Why Can't The Government Just Print More Money - " - NOT Such A Silly Question! - Economics in Plain English

Transféré par

Droits d'auteur :

Formats disponibles

11/8/2016

Vous aimerez peut-être aussi